There has been a persistent deficit budget year after year. Which of the following actions can be taken by the government to reduce the deficit?
- Reducing revenue expenditure
- Introducing new welfare schemes
- Rationalizing subsidies
- Expanding industries
Select the correct answer using the code given below:
[UPSC Civil Services Exam – 2015 Prelims]
(a) 1 and 3 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2, 3 and 4
Answer: (a)
Explanation:
- A budget deficit occurs when government spending is more than its revenues.
- Reducing revenue expenditure and Rationalizing subsidies will reduce the deficit. Hence statement 1 and 3 are correct
- The increase of taxes is also a way to reduce the deficit i.e higher taxes increase revenue and help to reduce the budget deficit.
- Introducing new welfare schemes will further enhance the budget deficit. Hence statement 2 is wrong
- Expanding industries will also increase the budget deficit as in the short run, it will not add anything to the tax revenues of the government, and thus will increase the budget deficit. Hence statement 4 is wrong
